Jordan Furlong is a strategic consultant and analyst who forecasts the impact of the changing legal market on lawyers, law firms and legal organizations.

Law firm size: past, present and future

After making an offhand comment in a previous post, that only about 10% of all Canadian lawyers were in large law firms, I began to wonder if that was, you know, accurate. So I checked the statistical breakdowns available at the Federation of Law Societies of Canada website and confirmed that yes, out of 79,147 active law society members at the end of 2006, 7,282 were in law firms with 51 or more lawyers, so the actual figure turns out to be closer to 9.2%.

But then, as often happens when I come too near a demographic breakdown, I became intrigued by a related issue: this time, the relative increase or decrease in large-firm membership over time.

Obviously, in the popular imagination, the last ten years have seen massive big-firm expansion, thanks mostly to steady growth by established players like McCarthys and Gowlings or mergers of smaller regional players into megafirms like BLG or Faskens. That perception has been aided by trade magazines like Lexpert that focused on the biggest firms (and a few high-profile urban boutiques) to the exclusion of other law practices. At the other end of the spectrum, we’ve also heard about the challenges facing sole practitioners and lawyers in smaller centers, the difficulties competing with title insurers and paralegals, and we would tend to expect that the day of the solo is ending.

Well, I ran the numbers and came up with a few charts that might be of interest. First of all, I compared types of private law practices in 1996 and 2006:

This data is not as complete as I’d like: the ’96 numbers don’t have any data from the Barreau du Quebec or the Law Society of New Brunswick, and the ’06 numbers are still bereft of input from the Barreau, although happily, the Chambre des Notaires is included in both sets.

What struck me first of all was the 15-point rise in sole practices as a percentage of all law practices over the past ten years. Most of that growth came at the expense of small, 2-10 lawyer partnerships, which lost about 2/3 of their numbers — half to solos, it would appear, and half through conversion to professional corporations, which came available for the first time in many provinces over the past decade.

But the really striking fact, to my mind, is that the other three groups — 11-25 lawyers, 26-50 lawyers, and 51+ lawyers — stayed virtually the same over that period as a percentage of all practices. So in big-picture terms, the only real evolution among law practice distribution from ’96-’06 was a dispersal of lawyers from small firms into sole practices and a near-100% increase in the number of professional corporations nationwide.

That’s all well and good, you say, but “51+ lawyers” doesn’t begin to reflect the swelling ranks of the biggest firms over the past ten years. What we need to look at is the total number of lawyers in these firms, and compare them decade-to-decade. True enough:

Again with the caveats: the FLSC’s statistical summaries are very good, but they didn’t provide breakdowns of the number of lawyers in professional corporations in either ’96 or ’06, so I was obliged to omit the corporations from these charts. But since we’re only looking at law firms in both years, at least it’s an apples-to-apples situation. So, what have we got?

What we’ve got is stratification — growth at the ends of the law-firm spectrum, thinning in the middle. Solos and big firms constituted about 41.6% of the private Bar in 1996. Just ten years later, that had grown to just slightly over half — 50.1%. Again, the greatest loss was felt in the smallest non-sole practices, but all three of the median-sized law firm groupings saw an overall decline in lawyer personnel. This confirms the general impression that the biggest firms are taking a greater slice of the overall lawyer population. But it also comes as something of a surprise that in spite of the many and growing challenges of hanging and maintaining your own shingle, sole practices have risen over the last ten years. Go big or go small, it seems.

The thing is, I don’t really expect either trend to continue. Solos first: according to reports by both the B.C. and Ontario law societies, an outsized number of sole practitioners in Canada are in smaller centers or rural areas, which the Census Bureau tells us are rapidly emptying out. They’re also considerably older than average (55 (edit) 51 is the mean age), and by and large, they don’t have young proteges waiting in the wings to buy or inherit their practices.

Now, I don’t think we’re looking at the demise of the sole practitioner, by any means — in the more heavily urban future that awaits Canada, solos will retain the agility and flexibility that will come to define the post-modern law practitioner. As the Internet continues to redefine professional services and niches assume even more importance in successful practices, the solo life will in many ways become even more attractive. But I expect these two trends will balance out in the medium term, and with the number of solos figuring to decline over the next ten years, then starting to pick up again in future. Fifty years from now, in fact, I can see solos dominating the legal profession.

One of the reasons for that future dominance is that the biggest law firms are reaching a crisis point. Either you’re operating on a global scale, now and in the future, or you’re not. And if you’re global, you need tons of cash and an international presence that approaches ubiquity. At the very least, you need to be a serious player in New York and London. Right now, Fasken Martineau is the only Canadian firm I can think of that has any kind of noticeable footprint in both these cities, and a footprint is a long way from even a foothold.

I figure that two or three — four at the very most — Canadian firms will end up competing globally, and their total lawyer complement will never dip below 1,000 lawyers each. The rest of the pack will fall back — done in by an inability to compete for the very best talent here and elsewhere, the loss of the biggest clients to the global firms, and the vicious circles that these two phenomena will create. (And that’s assuming conflict-of-interest rules can somehow be finessed to allow firms to maintain any kind of large, multi-jurisdictional presence). Some of these firms will disintegrate altogether, while some will shrink down to 1980s sizes. The lawyers these dying firms emit in the process, like stars going supernova before burning out, will form constellations of boutique practices or alliances of solos, nationwide and internationally.

Really, in 20 years’ time, the whole notion of “law firm sizes” may very well seem quaint. It won’t be all that relevant how big your law firm is — with the exception of the global giants, size really won’t matter, because the heavily niched, increasingly mobile and wired lawyers of the future won’t find enough advantages to a common office space and letterhead. It may not even take that long, if the changes we can already see rippling through the profession start multiplying faster than expected.

But either way, in the long run, expect to see a whole lot of sole practitioners, a great number of smallish boutiques, a few regional alliances, and a very small number of behemoths. In the future, your law firm can be huge and powerful, or tiny and quick — there’ll be very little room for anything else in between.

Leave a Reply

Edge International

Jordan Furlong is a Partner with Edge International. One of the world's leading management consultancies, Edge has been providing strategic planning to law firms for more than 30 years. Learn more about Edge.

Stem Legal

Jordan Furlong is a Senior Consultant with Stem Legal and leads its Content Marketing service. Stem provides online profile and business development services for law firms in the U.S. and Canada. Learn more about Stem.